What Is the International Bank of Reconstruction and Development?
The International Bank of Reconstruction and Development (IBRD) is a development bank administered by the World Bank. It offers financial products and policy advice to countries aiming to reduce poverty and promote sustainable development.
The IBRD is a global cooperative owned by 189 member countries.
Key Takeaways
- The International Bank of Reconstruction and Development (IBRD) is one of two major institutions administered by the World Bank.
- It was established in 1944 at the Bretton Woods Conference.
- The first loan it made was to France to help it rebuild its infrastructure, which was destroyed during World War II.
- The IBRD advises middle-income countries and creditworthy low-income countries that seek to build financial well-being, limit poverty, and enable sustainable development.
- In addition to advice, it offers financing to support projects that can help countries achieve greater prosperity.
Understanding the IBRD
The IBRD was founded in anticipation of the end of World War II, during the Bretton Woods Conference of 1944, a gathering of the 44 allied nations of the Second World War meant to establish the post-war global financial order. Its goal was to help war-torn European countries rebuild their infrastructures and economies. The International Monetary Fund was also formed at the conference.
Following the recovery from World War II, the IBRD broadened its mandate to help increase global economic growth and eliminate poverty.
The IBRD is one of two major institutions administered by the World Bank. The other is the International Development Association (IDA). The IDA is a financial institution dedicated to making developmental loans to the world’s poorest countries.
Middle-Income Countries
Today, the IBRD focuses its services and efforts on middle-income countries and creditworthy low-income countries. For fiscal year 2024, middle-income countries are those with a per capita gross national income ranging from $4,466 to $13,845 per year.
The IBRD adjusts these and other figures yearly to account for inflation, economic changes within middle-income countries, and other factors.
These middle-income countries, such as Indonesia, India, and Thailand, are often home to fast-growing economies that attract a lot of foreign investment and large infrastructure building projects.
Challenges Countries Face
At the same time, middle-income countries are home to 75% of the world’s population and 62% of the world's poor people. The benefits of this economic growth are unevenly distributed across their populations.
The success of middle-income countries is precarious, as many economies that look promising may collapse under the weight of corruption and economic mismanagement.
So the goal of the IBRD is to provide financing and economic policy advice to help the leaders of middle-income countries navigate the path toward greater prosperity.
The institution will often help finance infrastructure projects that grow a country’s economic potential and help governments manage public finances and cultivate the confidence of foreign investors.
The first loan ever issued by the International Bank of Reconstruction and Development was made to the government of France, to help finance the reconstruction of critical infrastructure.
Services Offered by the IBRD
To achieve its goal of providing essential advice and financial assistance, the IBRD offers a range of support:
- Financial solutions such as loans, guarantees, and risk management tools
- Advisory and knowledge services for governments at the national and municipal levels to help strengthen policies and public institutions
- Technical support throughout individual projects
- Public debt and asset management advisory assistance to help countries learn to protect and enlarge their financial resources
- Public financial management advisory support
IBRD Financing
To provide financial assistance to middle-income countries, the IBRD raises funds in the financial markets. Since 1946, it has loaned over $500 billion.
Its triple-A credit rating, sustained since 1959, gives it access to low-cost financing, which in turn lets it provide loans with favorable terms to the developing countries that it serves. It earns income from its return on equity and small lending margin, some of which it provides every year to the IDA to loan to poorer nations.
Why Does the IBRD Focus on Middle-Income Countries?
Middle-income countries are the focus of its mission because these are nations with huge potential for successful economic growth but a sizeable percentage of poverty, that already have infrastructure investments, and that receive large amounts of exported goods from other countries.
What's an Example of an IBRD Project?
The Peru Sierra Irrigation Subsector project is one example of many. The Sierra area of Peru is an agricultural sector that experiences severe poverty. The IBRD provided a loan of $20 million and substantial advisory support to modernize irrigation systems, improve irrigation technology, increase irrigation capacity, and formalize water rights. The better irrigation allowed farmers not only to grow more crops but to change over to crops with greater market value.
Does the U.S. Own the IBRD?
No, but it is one of the 189 member nations of the cooperative that does own it. The U.S. is the largest shareholder of the organization, with 15.8% of voting rights.
The Bottom Line
The International Bank of Reconstruction and Development is a World Bank institution owned by a cooperative of 189 countries around the world. Its mission is to support developing countries with financial products and advisory services to help them achieve greater prosperity, reduce poverty, and engage in the sustainable development of resources.
